Mayor John Callahan said while the downgraded bond rating is not good for the city, Standard & Poor’s still gave the city a stable outlook.

"The downgrade is a recognition of the challenges we've faced, the stable outlook is the recognition of the plan we have in place," he said.

City officials admitted in November that they were $18.8 million behind in bills because of a long-running cycle of using one year’s revenues to pay the previous year’s bills. Callahan wanted the city to borrow $20 million to cover the back bills and also fund $1.2 million in this year’s budget, but city council instead backed a plan to borrow $16 million and raise property taxes by 0.75 mills.

Council is scheduled to vote on the $16 million loan Tuesday. Council President Robert Donchez said he was glad Callahan today told council about the bond rating downgrade because communication has been a major issue between council and the administration.

"Because it was dropped, we may have to pay more in the issuance cost and possibly a higher interest rate," Donchez said. "We just can’t use one-time revenue sources as permanent revenue. That’s probably one of the reasons why the bond rating was reduced."

The lower bond rating also affects the Bethlehem Authority, through which the city plans to borrow the $16 million through an agreement where the authority buys a city asset and the city leases it back from the authority.